A Simple Test for Unit Root Bilinearity

Wojciech Charemza, Mikhail Lifshits and Svetlana Makarova ()
Additional contact information
Mikhail Lifshits: St. Petersburg State University

No 2002/01, EUSP Department of Economics Working Paper Series from European University at St. Petersburg, Department of Economics

Abstract: The paper introduces a t-ratio type test for detecting bilinearity in a stochastic unit root process. It appears that such process is a realistic approximation for many economic and financial time series. It is shown that, under the null of no bilinearity, the tests statistics are asymptotically normally distributed. Proofs of this asymptotic normality requires the Gihman and Skorohod theory for multivariate diffusion processes. Finite sample results describe speed of convergence, power of the tests and possible distortions to unit root testing which might appear due to the presence of bilinearity. It is concluded that the two-step testing procedure suggested here (the first step for the linear unit root and the second step for its bilinearity) is consistent in the sense that the size of step one test is not affected by the possible detection of bilinearity at step two.

Keywords: time-series econometrics; testing; nonstationary bilinear processes (search for similar items in EconPapers)
JEL-codes: C12 C22 G15 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2002-03-29, Revised 2002-03-29
Note: Paper submitted to 57th Econometric Society European Meeting, February 2002, http://www.eea-esem.com/papers/eea-esem/esem2002/617/Bilinear.pdf
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://eusp.org/sites/default/files/archive/ec_dep/wp/ec-01_02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eus:wpaper:ec2002_01

Access Statistics for this paper

More papers in EUSP Department of Economics Working Paper Series from European University at St. Petersburg, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mikhail Pakhnin ().